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NATIONAL ECONOMICS UNIVERSITY -NEU BUSINESS SCHOOLBachelor of Business Administration in English - MICROECONOMICS - FINAL GROUP PROJECT TOPIC THE COFFEE INDUSTRY LECTURER: TS Trần Thị Hồng Việt Group – EBBA 14.1 Nguy-n Huy Đô - 11221328 Nguy-n Qu6c Kh8nh - 11223064 L< Trần Ng=c Nam - 11224451 Nguy-n Hồng Quân - 11225377 TA VB DBng – 11221515 Ha Noi, January, 2023 Contents INTRODUCTION DEFINITION 2.1 COFFE COMMODITY MARKET 3-4 2.2 FACTORS AFFECT COFFEE COMMODITY MARKET 3-4 COFFEE INDUSTRY IS CLOSER TO COMPETITION THAN MONOPOLY 4-5 3.1 FACTOR AFFECT COMPETITION 3.2 WHY COFFEE COMMODITY MARKET IS COMPETITION SUPPLY OF COFFFEE 6-7 DEMAND OF COFFEE 7-8 FACTORS AFFECTED TO THE SUPPLY AND DEMAND OF COFFE 8-14 6.1 FACTOR AFFECTED TO THE SUPPLY 6.2 FACTOR AFFECTED TO THE DEMAND CONCLUSION REFERENCES 8-10 10-14 15 Introduction Coffee is a widely used beverage in every country It is a very profitable crop Consequently, the global coffee market is quite advanced Among the nations that export coffee, this one has the fastest growth rate The demand for coffee has not dropped but rather grown, particularly during the COVID-19 epidemic when the global economy was badly impacted Vietnam is no different;The second-largest producer and exporter of coffee worldwide is Vietnam Given that the population is still growing at a pace of around one million people per year, the country's coffee industry is predicted to develop significantly over the course of the projected period Therefore, we chose Coffee market to be the topic of the final Microeconomics group projects Definition 2.1 Coffee commodity market A common plant, coffee, is native to Africa and is grown in parts of the Indian Ocean before eventually spreading to nearby areas and being produced all over the world Coffee has evolved over hundreds of years to become a widely consumed beverage Coffee is a very profitable crop In the coffee commodity market in Vietnam, it includes raw coffee and coffee productions which is processed into beverage,etc In addition, Vietnam is an agricutural country, there are many areas where are able to cultivate and produce Coffee on a large scale, these areas have suitable weather, waters, bazan soil, such as Buon Ma Thuat, Daklak Besides that Vietnam has numerous enterprises capable of producing and exporting Coffee such as Trung Nguyen Legend, King Coffee, Phuc Long Tea & Coffee,etc Furthermore, the auarantee of the suppy of distributors, especially large distributors, has helped stabilize the source of manufactured goods, such as Aeon Vietnam co, the Vinmart and Vinmart +, … and major export markets such as America, China, Japan, Korea,… 2.2 Factors affect coffee commodity market Recently, we can be seen that there is an increasing in the number of coffee raw and products, there are many other factors affecting the market, including: Price, Input price, Production technology, Supplier’s expectation, Government policy, Consumer’s income and Number of consumers These factors will greatly affect the supply from businesses and the demand from consumers In particular, customer income, tastes, and expectations will directly affect consumer demand; selling prices, technology, human resources, and government policies will affect the supply of goods in the market Coffee industry is closer to competition than monopoly 3.1 Factors affect competition From a microeconomics perspective, competition is decided by simply factors: products features, the wide variety of sellers, statistics availability, location and obstacles to entry Ech element hinges on the availability or splendor of subsitutes and while no options exist the corporation is a vendor of a completely unique product, a monopoly exists and there is a zero oppo sition In short, competition happens when there are many sellers, easy entry, identical products and sellers are price takers 3.2 Why coffee market is competition (*) Product features: The features of the coffee market today are similar.Coffee is a beverage that the French brought to Vietnam in the 19th century and that has since assimilated into Vietnamese life and culture Because caffeine, a component of coffee, can enhance your short-term memory if you consume it in moderation throughout the day, most individuals drink coffee in the morning Additionally, coffee aids in preventing oxidation Caffeine in coffee helps to reduce mental cognitive loss by preventing the buildup of beta-amyloid plaque, which starts the process of Alzheimer's disease, a form of dementia Additionally, coffee protects against liver, breast, and rectal cancers, especially in women For athletes, coffee can aid improve excerise performance (*) The wide variety of sellers: Although producing coffee is difficult and expensive but Vietnam as a developing nation and the former second-largest coffee producer in the world the quality must makes up for the quantity and assure the demand The cost of producing coffee is not too high, so that in Vietnam there arae main coffee distribution channels 1, Production group: Not too much company in Vietnam are qualified to produce coffee that complies with the prescribed standards Besides that, coffee producers must follow to a numerous requirement regarding staff, infrastructure, techonology and quality These businesses are eligible to expand in the market and the main exporter of Vietnam’s coffee to the world 2, Agents and businesses who distribute coffee in bulk, are included in the wholesale group This organization frequently works as a production facility or as a partner with one They are always the top businesses in the nation for the distribution and manufacture of smart devices and supplies That includes a chain of both large and small coffee shop, a supermarket, and a shopping center,etc (*) Obstacles to entry: We have a very large coffee production, so it is easy for sellers to import, but the cost of preserving and forming the product is quite large In order to produce better quality and better quality and quantity of coffee than usal, the production cost needs to be relatively large Producers need to be careful in barriers to entry (*) Statistics availability: The availability of information is also important, and it largely revolves around price discovery Currently, large companies have their own websites, social media platforms to update products and prices that is so convenient for customers to keep track and compare For ordinary coffees users can directly consult the price, because coffee products are so popular and interested by a number of consumers (*) Strategy Competing on the type of coffee so that each company can make a big profit, so that most of the coffee is present throughout our country for many people to know Due to the increasing competition, most people will invest in advertising, to promote the product to the market with new product ideas In addition, nowadays people have a tendency to buy Coffee in distance through e-markets such as shoppee food, nowfood,etc So that by locating their money resources to advertising their products on these e-market that can attract more consumers’ attention Which is very helpful for the company to increase the revenue (*) Location Coffee are usually sold at major roads, in coffee shops, beverage spots,etc So that companies want to compete to be distributed in large locations that are easy to attract consumers Especially nowadays, consumers have a tendency to buy coffee frequently so a large and reputable sales location will help the company increase total revenue Supply of Coffee Beginning with talking about coffee supply in the world, there are many countries capable of exporting coffee in a large quantity.We can mention of the world's leading export names such as Brazil, Colombia, Indonesia, India, etc And our Vietnam is also of them Our Vietnam is the 2nd largest coffee exporter in the world Coffee is one of export items with a turnover of over billion USD/year With that value, it belongs to the leading group of the agricultural sector and rural development sector and contributes to the growth of commodity exports in Vietnam In Vietnam, thanks to the climate and suitable terrain, those things have helped our country's coffee production to be higher and higher Coffee is grown a lot in Vietnam, we must mention the first is the Central Highlands In particular, Buon Ma Thuot coffee bowl in Dak Lak is one of the largest coffee bowls in the world With ideal weather conditions, this place is suitable for growing coffee, especially Robusta coffee Coffee production in Buon Ma Thuot is currently at the top of the country Besides the "coffee capitals", Vietnam has many coffee growing places: Gia Lai, Quảng Trị, Đắk Hà, Đắk Mil, Đắk Hà, … In the EU market, Vietnam is the second largest coffee supplier after Brazil (22.2%), accounting for 16.1% market share in volume In particular, in 2021, the rapid increase in world coffee prices has supported Vietnamese enterprises to earn very positive export turnover, although the amount of coffee exported has decreased,it leads to an increasing in price of Coffee In 2021,Because of Covid-19 the quantity of coffee Vietnam supplies to external and uses in domestic that is decreased that leads to an increasing in the price of coffee.However, despite the Covid-19 pandemic, Vietnam's coffee exports still brought in a turnover of over billion USD Vietnamese coffee has accounted for more than 30% of the total imported coffee of the Document continues below Discover more from: Microeconomics Đại học Kinh tế Quốc… 648 documents Go to course 53 379 89 Premium 16 bo de trac nghiem kinh te vi mo co dap an Microeconomics 100% (62) Premium Giao trinh kinh te vi mo Lecture notes Full lectures Microeconomics 97% (79) Premium Test Bank for Microeconomics Microeconomics 100% (14) Premium Microeconomics midtermEXAM 1đề Lẻ Microeconomics 100% (13) Premium Midterm vi mô - Đề mid term thầy Bảo số Microeconomics 100% (10) Premium Giao trinh kinh te hoc 122 Microeconomics most populous market Demand of coffee When it comes to supply, we definitely have to talk about demand, in general, we can see that most people have had coffee at least once There are people who are so addicted to coffee that without it every morning, they will work unfocused and lack energy for the long day In the world, we can name the top coffee consumers in the world: Finland, Norway, Iceland, Denmark, Returning to Vietnam, coffee can also be considered a "national" drink Vietnamese people also often enjoy coffee every day We must have encountered big coffee brands in Vietnam When talking about coffee brands in Vietnam, people immediately think of Trung Nguyen, Highland, The Coffee House, These coffee brands are increasingly expanding, reaching the customer market, from which they will have loyal customers Besides that there are numerous coffee distributors in Vietnam, so there would be a wide range of coffee pricing Due to daily price changes in the global market, coffee prices will also change However, Vietnamese people have long been accustomed to drinking coffee, thus despite price changes, customers continue to purchase the beverage Coffee helps people concentrate, become smarter, have more energy, and reduce stress Some customers find it impossible to stop drinking coffee since it contains caffeine Additionally, it takes a long time to stop drinking coffee or find a substitute The growing coffee culture may potentially lead to higher than usual consumer demand for the beverage The popularity of coffee from other cultures has piqued consumers' curiosity and desire to try new coffee flavors That further stimulates big brands to have strategies to attract new customers and retain old ones thanks to the quality of coffee and accompanying services However, with the economic situation in 2022, the 100% (7) economy is somewhat depressed and the average price level of coffee increased before the pandemic a cup of black coffee was about 20.0-25.00 VND , but now it is 25.00-35.00 VND.But people's demand for coffee is still more and more, no longer the same as before Total coffee consumption in Vietnam from 2015 to 2022 with a forecast to 2023 (in 1,000 60 kg bags) Factors affected the supply and demand of Coffee 6.1 Factors affected the supply (*) The price factor ● Firstly, The price is the main factor that directly affects the supply of the products; Until now despite being affected by Covid-19, the coffee prices have still increased well and remained above the 11-year highs in this December this year In addition, during the peak pandemic in July 2020, the price of kilogram of coffee increased before that figure before the pandemic from 34.800 VND to 40.800 VND per KG in Robusta coffee As a consequence, more and more firms and companies are engaging in this kind of commodity market Leading to an increase in supply For instance, based on a research from baonhandan.com the coffee.Leading to an increase in supply For instance, based on a research from statista.com, from June 2022 to August 2022, more than 200 firms and companies decided to take part in the Coffee commodity market in Vietnam, which leads to the huge number of productions related to coffee that is being produced (*) The non-price factors: ● Secondly, is the change in the production technology Due to the fact that, the improvement and advancement of technology in the coffee industry enables producers, firms, and companies to produce more and more at lower cost Therefore, a huge change in technology can increase the amount of Coffee that firms are able to supply to the market Back in the day, without technology, people in coffee cultivation areas needed to pay 12 hours to dry the raw coffee, but thanks to the advancement of technology that process was reduced to hours For example in Dak Lak - the pyrolysis technology applied to coffee that not only helps reduce greenhouse gas emission, but also improves both quantity and quality of Coffee production and also decreases the labor costs ● The third factor is the government policies that play a crucial role in economic regulation The legislation that the government enacts will have a direct influence on the supply of commodities Government incentives or access to inputs at reduced costs encourage coffee producers to increase their output With the current pricing, growers can offer more coffee to the market at reduced production costs For example, Vietnam’s government decided to reduce 50% of land tax for agriculture enterprises This policy aims to support enterprises to invest in agriculture and encourage land accumulation ● The fifth is the input price some manufacturers can import raw coffee with a lower price than before thanks to the development of technology, labor’ skills and the open policies of coffee from the govenrment That saving time and money for bussiness This development has facilitated the supply of coffee to increase significantly ● Lastly is the supplier’s expectation in the market The market's supply is influenced by the supplier's predictions for the future When coffee producers anticipate a price drop, they increase supply to the market to get rid of previously processed goods to prevent or reduce losses 6.2 Factor affected the demand ● Income: Buyer income, which is a measure of consumers' available funds for purchases, is correlated with socioeconomic level The amount demanded rises in proportion to an individual's or group's income Additionally, the real income of the buyer or their real income may alter depending on the price of the underlying commodity Most commodities are in higher demand as income rises Coffee can be considered a commodity-common when taking into account the relationship between income and consumption Because people drink more coffee as their income rises Currently on the market there are many shops, agents providing coffee distribution with many different types of products Each address will have a separate selling price for each product The Vietnamese exporters and agents frequently bet on coffee as they wait for the ideal opportunity to sell at a premium price because the domestic coffee market frequently swings in accordance with the trend of the global market Additionally, when the average household expenditure rises, so does the demand for coffee ● Replacing Goods: Caffeine is generally safe and non-toxic for most people, at least when they consume no more than four cups of coffee each day However, consuming too much coffee can lead to anxiety, interfere with sleep, or raise heart rate People may therefore discover alternatives to coffee like the following: - Matcha green tea: The cost for a glass outside the store is between 30,0 and 40,0 The price for 250g of packaged matcha green tea powder ranges from 600,0 to 700,0 As can be seen, matcha is far more expensive than coffee - Hot cocoa: The typical cocoa powder on the market now costs between 50,0 and 80,0 per 250g.The cost of a cup of cocoa that is ready to drink is 25,00 Even while cocoa is not much more expensive than coffee, it is still not as widely consumed as a typical coffee beverage - Black tea: The most widely available black tea costs between 60,0 and 90,0 per 250g on the market Black tea for coffee is more expensive and is not used frequently - A green tea The price per 250g of the most popular form of packed dry tea is between 40,0 and 60,0 Iced tea costs between 3,00 and 5,00 per cup and is frequently offered on sidewalks Per 250g, there are 10,0–15,00 tea leaves In addition to being a consumer favorite, green tea is also reasonably priced and frequently used in place of coffee ● User preferences Approximately 10% of coffee users determine the change in demand when the price changes, so it can be concluded that the good for coffee has a price inelastic demand According to VHLSS, Coffee in the Vietnamese market has up to 90% of the total coffee consumption market volume are loyal users, so when placing coffee in its own market, coffee is considered to be an essential commodity Additionally, coffee is not an expensive product for the majority of people, and because its price only varies by a little amount, the impact on household income is minimal From there, it can be seen that coffee continues to be a popular beverage among consumers In 2019, conduct a survey on customer preferences for coffee in Hanoi and Ho Chi Minh Extra than 40% of those surveyed stated that they would pay 25% more for coffee of reliable quality about 61.1% of coffee shop owners claimed that their establishment has no particular clientele; the remaining 44.4% of establishments had a variety of regular clients, including office employees, teenagers, regular laborers, and tourists The stores that often serve the officials and staff that work at these enterprises are typically ones that were opened close to them Numerous automobiles pass by and it is simple to see the shops where a variety of individuals come to drink ● Consumer expectations The expectations of customers in the market generally and the Vietnamese coffee market specifically go hand in hand with tastes The findings of a survey on why customers select coffee shops in different types of stores are listed below: 55 16 af o l ab rd e 52 i ce pr c de en tb 43 35 32 33 25 nd pr store chains tf uc od ea Id 27 33 24 or av lb ar a loc independent store 16 17 n to sl a oc 15 n to ' nt au st e r hea sidewalk shop a va d ri e m 11 u en Customers favor chain stores over independent shops, bar spaces over sidewalk cafes, and independent stores over independent shops, as can be seen from the data by reasonably priced From it, it is clear that consumers' decisions regarding coffee intake are greatly influenced by the selling price and flavor of the beverage Customers anticipate a lower cost for high-end coffees like Starbucks and Highlands Coffee When Vietnamese people's income is low, the majority of consumers will have easier access to these brands On the other hand, sidewalk stores are supposed to offer high-quality products and hygienic manufacturing procedures Customers also anticipate their own income in addition to expectations regarding the cost and quality of coffee Vietnamese people's average income is low, which discourages consumers from buying coffee in part These customer expectations have not been realized in the context of Covid over the last two years The epidemic has had a significant impact on consumers' daily lives and income In addition, Vietnam's coffee crop this year was lost, its yield was lower, and it was harvested later than in prior years As a result, the market is deficient in coffee, which drives up costs 6.2B Other factors affected the demand ● Disease affects demand The intricate development of the Covid-19 wave has had a significant impact on both the direct and indirect consumption of coffee A number of establishments have shut down many times as a result of the heated environment during the last two years An estimated 20,0 large and small coffee shops in Vietnam had to temporarily halt operations at least once during the last outbreaks The number of people purchasing coffee goods has drastically reduced along with social distancing initiatives Additionally, the epidemic has a direct impact on people's income in general and coffee drinkers in particular Coffee customers are more circumspect in their choice to purchase goods made from this commodity because of the negative impact on their income However, due to customer desire for coffee at home, coffee consumption is still rising The protracted epidemic scenario and the tight application of social isolation considerably increased demand for this commodity When the epidemics are over, it is seen and seen that coffee shops are always closed This makes sense when consumers haven't had access to necessities for a while and can't find what they need for leisure and services in traditional brick-and-mortar establishments ● Advertisement Types of business advertising: 1.Advertising using images: This method of advertising is more engaging, easy to interact with, and gets right to the subconscious mind of the consumer 2.Advertising that uses emotional expression: Media is more contagious than visual advertising because it has a strong interaction draw entice consumers' interest and evaluation Then, post the advertisement online for quick distribution and to reach a wider audience: YouTube and Facebook users' likes, shares, and comments are counted via articles in newspapers, online publications, and familyand health-related periodicals like Marketing and Family, Health and Life, Channel 14, etc 3.Advertising forms of coffee shops: Create a loyalty program, hand out flyers, offer free drinks, plan minigames, utilize vouchers, have good customer service, have a café that is attractively designed, and offer appealing menus all techniques Most coffee shops use the aforementioned advertising strategy, which sparks curiosity among various clientele groups Increase their coffee product sales and usage after that 7 Conclusion With all mentioned above, we are convinced that the Coffee commodity market is closer to competition than monopoly About the factors that can affect the supply of coffee, there are factors: price, technology and input price Income and consumer’s expectation can affect the demand of Coffee However, when there were external factors affecting the market such as the increasingly tense situation of the Covid 19 pandemic in 2020-2022, a number of outstanding problems occurred Therefore, my group would like to offer a few solutions to help balance the coffee market ● The state should encourage production and have many policies to support businesses in the coffee manufacturing industry to meet the people’s shortage ● The state also should fund their resources in order to expand more infrastructure such as roads, sea ways to make time for transportation, exports to be shorter, so that Business' coffee productions can be easier to access more consumers, markets, … References Vietnam ranked 2nd coffee exporter in the world 9/1/2022 HNN (mard.gov.vn) https://www.mard.gov.vn/en/Pages/vietnam-ranked-2nd-coffee-exporter-inthe-world.aspx Coffee market grows with difficulties but sill sees many opportunity ( Friday, December 17,2021) https://en.nhandan.vn/coffee-market-grows-with-difficulties-but-stillsees-many-opportunities-post108423.html Pyrolysis technology improves coffee quality (Noverbem 08,2018) https://en.vietnamplus.vn/pyrolysis-technology-improves-coffeequality/141493.vnp Vietnam’s policy coffee (21-7-2016) https://ap.fftc.org.tw/article/1086 Total coffee consumption in Vietnam from 2015 to 2022 with a forecast to 2023 https://www.statista.com/statistics/315003/vietnam-total-coffeeconsumption/ Demand and supply of coffee in Australia https://myassignmenthelp.com/free-samples/demand-and-supply-ofcoffee-in-australia-market Price volatility in the coffe market https://www.tutor2u.net/economics/reference/price-volatility-in-the-coffeemarket
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